INTERNATIONAL MONETARY SYSTEMS LTD /WI/ - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	Financial_Report.xls
EX-31.1 - CERTIFICATIONS - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	f10q0913ex31i_international.htm
EX-32.1 - CERTIFICATIONS - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	f10q0913ex32i_international.htm
EX-31.2 - CERTIFICATIONS - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	f10q0913ex31ii_international.htm
EX-32.2 - CERTIFICATIONS - INTERNATIONAL MONETARY SYSTEMS LTD /WI/	f10q0913ex32ii_international.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-30853

INTERNATIONAL MONETARY SYSTEMS, LTD.

(Exact name of Registrant as specified in its charter)

Wisconsin		39-1924096
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

16901 West Glendale Drive, New Berlin,

Wisconsin 53151

(Address of principal executive offices)

(262) 780-3640

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company T
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of Common Stock, $.0001 par value, outstanding as of November 1, 2013, was 725,096 ( post-reverse split).

INTERNATIONAL MONETARY SYSTEMS, LTD.

TABLE OF CONTENTS

		Page No.
Part I.	FINANCIAL INFORMATION

Item 1 -	Financial Statements September 30, 2013

	Consolidated Balance Sheets –September 30, 2013 (Unaudited) and December 31, 2012	3

	Unaudited Consolidated Statements of Operations – Three Months and Nine Months Ended September 30, 2013 and 2012	4

	Unaudited Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2013 and 2012	5

	Unaudited Notes to Consolidated Financial Statements	7

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	14

Item 4 -	Controls and Procedures	14

Part II.	OTHER INFORMATION	15

Item 1	Legal Proceedings	15

Item 1A -	Risk Factors	15

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 3 -	Defaults on Upon Senior Securities	15

Item 4 -	Specialized Matters	16

Item 5 -	Other Information	16

Item 6 -	Exhibits	16

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(UNAUDITED)
ASSETS
Current assets
Cash	$	836,275		$	956,217
Marketable securities		217,101			181,893
Accounts receivable, net		634,842			851,545
Earned trade account		250,729			78,660
Prepaid expenses		189,047			175,923
Total current assets		2,127,994			2,244,238
Other assets
Property and equipment, net		532,926			653,224
Membership lists and other intangibles, net		3,523,601			4,418,212
Goodwill		3,507,522			3,507,522
Assets held for investment		94,823			164,461
Total non-current assets		7,658,872			8,743,419
Total assets	$	9,786,866		$	10,987,657
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	$	918,070		$	916,026
Credit lines, short term notes, and current portion of long term debt		1,082,275			1,426,099
Current portion of notes payable to related parties, including short term note		50,000			353,171
Common stock subject to guarantee		39,702			75,000
Total current liabilities		2,090,047			2,770,296
Long-term liabilities
Long term debt, net of current portion		1,206,201			1,647,349
Notes payable related parties, net of current portion		525,000			161,613
Deferred compensation		291,000			291,000
Deferred income taxes		438,738			730,609
Total long-term liabilities		2,460,939			2,830,571
Total liabilities		4,550,986			5,600,867
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $.0001 par value, 2,000,000 authorized, -0- outstanding		-			-
Common stock, $.0001 par value 28,000,000 authorized, and 725,096 and 752,930 issued and outstanding at September 30, 2013 and December 31, 2012, respectively		73			75
Paid in capital		7,529,917			7,771,602
Treasury stock, 2,621 and 12,591 shares at September 30, 2013 and December 31, 2012, respectively		(15,095	)		(141,436	)
Accumulated other comprehensive income		64,707			33,321
Accumulated deficit		(2,343,722	)		(2,276,772	)
Total stockholders’ equity		5,235,880			5,386,790
Total liabilities and stockholders’ equity	$	9,786,866		$	10,987,657

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012

Net revenue	$	3,116,046		$	3,256,392		$	9,345,261		$	9,913,249
Operating expenses:
Employee costs		1,881,236			1,943,879			5,840,574			5,940,971
Selling, general and administrative		842,988			819,126			2,405,538			2,486,693
Depreciation and amortization		343,150			371,977			1,059,885			1,150,855
Total operating expenses		3,067,374			3,134,982			9,305,997			9,578,519

Income from operations		48,672			121,410			39,264			334,730

Other income (expense)
Interest income		20			137			926			802
Gain (loss) on sales of assets		(9,118	)		(2,600	)		(8,215	)		3,072
Interest expense		(59,720	)		(82,253	)		(195,502	)		(246,994	)
Total other income (expense)		(68,818	)		(84,716	)		(202,791	)		(243,120	)

Income (loss) before income taxes		(20,146	)		36,694			(163,527	)		91,610
Income tax (expense) benefit		10,605			(11,438	)		96,577			(12,542	)

Net income (loss)		(9,541	)		25,256			(66,950	)		79,068

Components of comprehensive income (loss):
Foreign currency translation adjustment		966			989			(3,136	)		(5,974	)
Unrealized gain on available for sale securities		11,700			9,937			34,522			24,136

Comprehensive income (loss)	$	3,125		$	36,182		$	(35,564	)	$	97,230

Net income (loss) per
common share - basic	$	(.01	)	$	.03		$	(.09	)	$	.10
- dilutive	$	(.01	)	$	.03		$	(.09	)	$	.10
Weighted average common
shares outstanding - basic		727,583			772,179			713,780			797,103
- dilutive		727,583			772,179			713,780			797,103

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(66,950	)	$	79,068
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,059,885			1,150,855
Bad debt expense		(5,403	)		(18,050	)
Amortization of note discount		7,471			9,096
Stock issued for services		-			6,800
(Gain) loss on sales of assets		8,215			(3,072	)
Changes in assets and liabilities
Accounts receivable		222,106			301,109
Earned trade account		(224,093	)		(357,825	)
Prepaid expenses		(13,124	)		148,011
Accounts payable and accrued expenses		2,044			(82,587	)
Deferred income taxes		(291,871	)		(246,577	)
Net cash provided by operating activities		698,280			986,828
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash		--			206,956
Capital expenditures		(16,819	)		(104,685	)
(Increase) in marketable securities		(686	)		(6,750	)
Proceeds from sale of assets		3,952			-
(Increase) decrease in cash surrender value		66,338			(4,705	)
Net cash provided by investing activities		52,785			90,816
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		555,000			450,000
Net change in credit lines		45,697			(111,260	)
Payments on notes payable, convertible notes payable and related party notes		(1,332,924	)		(651,206	)
Purchase of treasury stock		(135,644	)		(809,247	)
Net cash used in financing activities		(867,871	)		(1,121,713	)
Effect of exchange rate changes		(3,136	)		(5,974	)

Net decrease in cash		(119,942	)		(50,043	)

Cash at beginning of period		956,217			1,018,250

Cash at end of period	$	836,275		$	968,207

INTERNATIONAL MONETARY SYSTEMS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Continued

	Nine Months Ended September 30,
	2013		2012
SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	200,391	$	247,307
Cash paid for income taxes	$	123,566	$	309,960

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Unrealized net gain on marketable securities	$	34,522	$	24,136
Notes issued for treasury stock	$	-	$	616,769
Treasury stock retired	$	276,208	$	1,735,053
Release of common stock guarantees	$	20,298	$	343,500
Common stock issued for conversion of note payable	$	-	$	200,000
Trade dollars exchanged for:
Capital expenditures	$	37,024	$	73,233
Purchase of treasury stock	$	15,000	$	-
Trade dollars received for capital assets	$	-	$	20,684

See accompanying notes to consolidated financial statements.

INTERNATIONAL MONETARY SYSTEMS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2013

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.

The Company's 10-K for the year ended December 31, 2012, filed on March 8, 2013, should be read in conjunction with this report.

Principles of Consolidation

The consolidated financial statements for 2013 and 2012 include the accounts of International Monetary Systems, Ltd. (“IMS” or “the Company”) and its’ wholly owned subsidiaries Continental Trade Exchange, Ltd., National Trade Association, Inc., INLM CN Inc. and INLM Holdings, Inc. Significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Sources and Cost of Revenue

The Company and its subsidiaries earn revenues in both traditional cash dollars and in IMS trade dollars.

Cash Revenue

Cash income is earned through fees assessed when a member joins, transaction fees generated when clients earn or spend their trade dollars, annual and monthly maintenance fees, finance charges on delinquent accounts receivable, and event fees.

Trade Dollar Revenue

Trade revenue is similarly generated through initial membership fees, monthly maintenance fees, transaction fees, finance charges on delinquent accounts, and event fees. Occasionally the Company will accept a favorable trade ratio in lieu of a cash fee.

Revenue Recognition

All revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.

Transaction fees are recognized upon receipt of transactional information accumulated by our systems or reported by our clients.

Membership fees, monthly maintenance fees, finance charges, and other fees are billed monthly to members' accounts, and are recognized in the month the revenue is earned.

Use of Trade Dollars

The Company uses earned trade dollars to purchase various goods and services required in its operations. All barter transactions are reported at the estimated fair value of the products or services received.

Occasionally, the Company sells IMS trade dollars for US dollars. The cash received in these sales is included in gross revenue and the carrying value of the trade dollars up to the value of the cash received is netted against revenue, with any excess cost included in selling, general and administrative expenses.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements

Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.

NOTE 2 – CASH

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. As of September 30, 2013, the Company has cash in excess of FDIC insurance of approximately $532,000. No losses have been incurred related to this credit risk exposure.

NOTE 3 – DEBT

In January 2013, the Company retired a note payable to a private individual with a balance $50,000.

In February 2013, the Company issued a note payable to a private individual which combined two convertible notes with outstanding balances of $200,000, removed the stock conversion option, and reduced the total borrowing to $125,000. The terms of the new note call for quarterly interest payments at 10% for two years, after which the terms of the note will be renegotiated.

In February 2013, the Company modified the terms of a note payable to a private individual with an outstanding balance of $100,000. The new terms include an additional $50,000 in borrowings for a total of $150,000 at 10% interest, quarterly interest payments through February 2015, at which time all outstanding principal and interest is due.

In March 2013, the Company issued a $70,000 note payable to a private investor. The terms of the note call for quarterly interest payments at 4% for two years, after which the note is payable in 24 monthly installments of $3,102, including interest at 4%.

In April, 2013, a number of convertible notes payable to related parties, including directors and officers, totaling $235,000, were renewed. The notes had been due between May and October, 2013 and are now due between May 2014 and October 2015. No other terms were modified.

In the first nine months of 2013, the Company has issued several notes totaling $210,000 to an officer for cash. The terms of the notes call for quarterly interest payments at 8% for two years, after which the note is payable in full. One note, for $50,000, was issued in the third quarter.

The Company’s indebtedness as of September 30, 2013 includes the following:

Lines of credit payable to financial institutions, due in 2013	$	72,000
Convertible notes payable to related parties, mature in 2014 and 2015		325,000
Non-convertible notes payable to related parties, maturing in 2015		250,000
Notes payable to third parties, $209,875 due in 2013		1,526,589
Convertible notes payable, fixed conversion terms, $115,171 due in 2013		689,887
Total indebtedness		2,863,476
Less current maturities, including credit lines and short term debt		(1,132,275	)
Long term debt, net of current maturities	$	1,731,201

Additionally, the Company has lines of credit (including the one described above) with various financial institutions with unused borrowing capacity totaling approximately $475,000 as of September 30, 2013, which may be drawn as needed.

A financial institution has issued a $65,000 standby letter of credit to a landlord in lieu of a security deposit.

NOTE 4 – EQUITY

Reverse Split

At the annual meeting of the Company’s shareholders on May 7, 2013, a 1 for 10 reverse split of the Company’s preferred and common stock was approved. The effective date of the reverse split was August 1, 2013. There was no affect on the par value. All stock related information in these financial statements has been restated to reflect the split.

Common Stock Guarantee Repurchase

In the first quarter of 2013, IMS repurchased 500 shares of common stock at $30.00 trade dollars per share, thereby releasing $15,000 of common stock guarantee. The shares were placed in treasury.

Share Buyback Program

In accordance with a board approved stock buyback plan, during the first nine months of 2013, the Company purchased 17,771 shares, at a cost of $150,664, in open market and private transactions. Of these totals 2,621shares costing $15,871, were repurchased in the third quarter. The repurchased shares were placed in treasury.

Treasury Stock Retirements

In the first nine months of 2013, the Company retired 27,742 shares of treasury stock which had been acquired at a cost of $276,208. Of these shares, 14,725 shares, acquired at a cost of $139,668, were retired in the third quarter.

Stock Issued for Services

No stock has been issued for services in 2013.

Stock Options

The Company has adopted an incentive stock option plan under which certain officers, key employees, or prospective employees may purchase shares of the Company's stock at an established exercise price, which shall not be less than the fair market value at the time the option is granted. The final exercise date is any time prior to the five-year anniversary of the first exercise date.

There are no options outstanding at September 30, 2013.

Stock Warrants

No warrants were issued in the current period.

There are no warrants outstanding as of September 30, 2013.

NOTE 5 – INCOME TAXES

The difference between the combined Federal and state statutory rate and the effective rate for the three months and nine months ended September 30, 2013 relates to the difference in timing of deduction for certain expenses, primarily bad debts, amortization of acquired membership lists, and depreciation of property and equipment.

NOTE 6 – CONTINGENT LIABILITIES

In the ordinary course of business, the Company is occasionally involved in litigation, both as plaintiff and defendant. Management either litigates or settles claims after evaluating the merits of the actions and weighing the costs of settling vs. litigating. There are currently no open litigation matters which the Company feels will result in a material loss.

INTERNATIONAL MONETARY SYSTEMS, LTD.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to current and historical information, this Quarterly Report on Form 10-Q contains forward-looking statements. These statements relate to our future operations, prospects, potential products, services, developments, business strategies or our future financial performance. These statements can generally be identified by the use of terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “target,” “will” or the negative of these terms or other similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual events or results may differ materially. We undertake no obligation to update or revise publicly any forward-looking statement after the date of this report, whether as a result of new information, future events or otherwise.

HIGHLIGHTS

Operations

The Company was able to reduce operating costs in the first nine months of 2013 through continued review and evaluation.

Membership and trade volume in the Company’s three newest markets continues to grow.

Balance Sheet

The working capital deficit shown at December 31, 2012, was eliminated in the first nine months of 2013.

Total liabilities have been reduced by $1,050,000 since December 31, 2012.

Return to Shareholders

During the nine months ended September 30, 2013, 17,771 shares of the Company’s stock have been repurchased under the Company’s stock buyback plan and stock buyback guarantees.

During the nine months ended September 30, 2013, 27,742 shares of treasury stock were retired.

RESULTS OF OPERATIONS

CURRENT QUARTER

Revenue

Revenue decreased 4.3% in the third quarter of 2013 compared to the same period in 2012, as we continue to see the residual affects of uncertain economic and regulatory climates.

Expenses

Operating expenses in the quarter ended September 30, 2013 were $3,067,374, a decrease of $67,608 or 2.2% compared to the third quarter of 2012. This decrease is primarily due to decreased employee operating costs as a result of continued review and evaluation of operations.

The Company generated operating income of $48,672 for the quarter, compared to operating income of $121,410 in 2012. After adjusting for interest and income taxes, there was a net loss for the quarter of $9,541 compared to net income of $25,256 in the third quarter of 2012. Interest expense has decreased as the Company has aggressively paid down the debt load taken on strategically to fund the stock buyback program expanded in 2011.

EBITDA for the three months ended September 30, 2013 and 2012 are as follows:

Adjustments to Reconcile GAAP Net Income to EBITDA

	2013		2012
Net income (loss)	$	(9,541)	$	25,256
Interest expense		59,720		82,253
Income tax expense (benefit)		(10,605)		11,438
Depreciation and amortization		343,150		371,977
EBITDA	$	382,724	$	490,924

YEAR TO DATE

Revenue

Revenue decreased 5.7% in the first nine months of 2013 compared to the same period in 2012, as we continue to see the residual affects of uncertain economic, tax, and regulatory climates.

Expenses

Operating expenses for the nine months ended September 30, 2013 were $9,305,997, a decrease of $272,522, or 2.8% compared to the same period in 2012. This decrease is primarily due to decreased non-employee operating costs as a result of continued review and evaluation of operations.

The Company has generated operating income of $39,264 for year to date, compared to operating income of $334,730 in 2012. After adjusting for interest and income taxes, the net loss for the first nine months of 2013 was $66,950 compared to net income of $79,068 in the comparable period in 2012. Interest expense has decreased as the Company has aggressively paid down the debt load taken on strategically to fund the stock buyback program expanded in 2011.

EBITDA for the nine months ended September 30, 2013 and 2012 are as follows:

Adjustments to Reconcile GAAP Net Income to EBITDA

	2013			2012
Net income (loss)	$	(66,950	)	$	79,068
Interest expense		195,502			246,994
Income tax expense (benefit)		(96,577	)		12,542
Depreciation and amortization		1,059,885			1,150,855
EBITDA	$	1,091,860		$	1,489,459

LIQUIDITY, SOURCES OF CAPITAL AND LINES OF CREDIT

On September 30, 2013, there was a working capital surplus of approximately $38,000, compared to a deficit of approximately $526,000 at December 31, 2012. Contributing to the reduction of the deficit was the renewal of several notes issued to related parties with a balance of $235,000 and three additional notes issued to an officer for $210,000 cash. We believe that current cash needs can be met with the present cash balance and from working capital generated over the next 12 months. Additionally, the Company has letters of credit with various financial institutions with unused borrowing capacity of approximately $475,000, which may be drawn as needed.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for IMS include the following:

REVENUE SOURCES AND REVENUE RECOGNITION

The Company and its subsidiaries earn revenues in both traditional cash dollars and in IMS trade dollars.

Cash Revenue

Trade Dollar Revenue

Trade revenue is similarly generated through initial membership fees, monthly maintenance fees, transaction fees and event fees. Occasionally the Company will accept a favorable trade ratio in lieu of a cash fee.

Revenue Recognition

Transaction fees are recognized upon receipt of transactional information accumulated by our systems or reported by our clients.

Membership fees, monthly maintenance fees, finance charges, and other fees are billed monthly to members' accounts, and are recognized in the month the revenue is earned.

Use of Trade Dollars

RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are stated at face value, net of the allowance for bad debts. Finance charges on receivables are calculated using the simple interest method on the amount outstanding.

The allowance for bad debts is maintained at a level that is management's best estimate of probable bad debts incurred as of the balance sheet date. Management's determination of the adequacy of the allowance is based on an evaluation of the accounts receivable, past collection experience, current economic conditions, volume, growth and composition of the accounts receivable, and other relevant factors. Actual results may differ from these estimates. The allowance is increased by provisions for bad debts charged against income and decreased by accounts written off as uncollectable.

GOODWILL AND MEMBERSHIP LISTS

Goodwill and membership lists are stated at cost and arise when IMS acquires another company or the assets of another trade exchange. Membership lists are amortized over the estimated life of ten years.

The Company tests goodwill and intangible assets at least annually for impairment, or when facts and circumstances indicate impairment is probable. It is the Company’s policy to test impairment at the end of each year. Therefore, no impairment of goodwill or membership lists was recorded in the first nine months of 2013.

INCOME TAXES

The Company accounts for income taxes in accordance with FASB ASC 740. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

RECENT ACCOUNTING PRONOUNCEMENTS

Management does not anticipate that any recently issued, but not yet effective, accounting pronouncements will materially impact the Company’s financial condition.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements or other relationships with unconsolidated entities.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required by Smaller Reporting Companies.

ITEM 4 CONTROLS AND PROCEDURES

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our evaluation under the framework in Internal Control — Integrated Framework issued by COSO, our management concluded that our internal control over financial reporting was effective as of September 30, 2013, in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

There was no change in internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1 Legal Proceedings

Item 1A Risk Factors

Not applicable for Smaller Reporting Companies.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

(a) and (b) There were no unregistered sales of equity securities.

					Maximum
	Total				Number of Shares
	Number		Average		That May Yet
	of Shares		Price Paid		be Purchased
Period	Purchased		Per Share		Under the Plans
Purchase related stock buyback guarantees
July 1 to July 31, 2013		-	$	-
August 1 to August 31, 2013		-	$	-
September 1 to September 30, 2013		-	$	-		1,323

Board Authorized repurchase plan
July 1 to July 31, 2013		-	$	-
August 1 to August 31, 2013		2,621	$	6.06
September 1 to September 30, 2013		-	$	-	unlimited

Item 3 Defaults Upon Senior Securities

None

Item 4 Mine Safety Disclosures

No applicable items for disclosure.

Item 5 Other Information

None

Item 6 Exhibits and Reports on Form 8-K

(a) Exhibits

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

31.2	Certification of Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document***

101.SCH	XBRL Taxonomy Extension Schema Document ***

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document ***

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document ***

101.LAB	XBRL Taxonomy Extension Label Linkbase Document ***

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document ***

*** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

(b) Reports on Form 8-K

INTERNATIONAL MONETARY SYSTEMS, LTD.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

International Monetary Systems, Ltd. (Registrant)

/s/ John E. Strabley
John E. Strabley, Chief Executive Officer
(Principal Executive Officer)

November 8, 2013

/s/ David A. Powell
David A. Powell, Chief Financial Officer
(Principal Accounting and Financial Officer)

November 8, 2013

INTERNATIONAL MONETARY SYSTEMS LTD /WI/ - FORM 10-Q - November 8, 2013

Attached files

INTERNATIONAL MONETARY SYSTEMS LTD /WI/ Reports